Pattye Benson

Community Matters

TENIG

No Custodial Outsourcing for 2012/13 but looks like Sports and/or Activity Fees Could be a Reality in T/E

Based on attending the TESD Finance Committee meeting, it looks like the custodial outsourcing in the school district is ‘off the table of consideration’ for another year. If you recall, the most significant cost-saving measure to the District remaining from last year’s budget was ‘outsourcing of custodial services’ with a savings listed as $950K. After internal TENIG (non-instructional union of TESD) discussion, the custodial workers made an offer to the school district, which was presented to the Finance Committee by school board president Karen Cruickshank.

For the 2012-13 year, the custodial workers of TENIG have offered a 10% reduction in their salaries and they will not take the 4.5% increase contained in their existing contract. In real dollars, the cost savings to the District is $197K in salary reduction, plus the additional percentage contractual savings for a total savings of approximately $285K!

Beyond the generosity of the custodian workers offer, the Board realizes that it is difficult to measure intangibles in the in-house custodial services … many of the employees live in the T/E and their families are part o the community. With that comes a level of safety that is difficult to measure. Although the custodial workers offer has to be reviewed internally by the District attorneys, the it received overwhelmingly positive support from the Board.

A $285K savings to the school district plus the bonus of saving local jobs … congratulations to TENIG, custodial workers, District staff and Karen Cruickshank (on behalf of the school board) for such a positive outcome early in the 2012/13 budget discussions.

Ray Clarke also attended last night’s Finance Committee meeting and I thank him for his willingness to share his thoughts and opinions below:

Notes from Ray Clarke, TESD Finance Committee Meeting

A relatively well-attended TESD Finance committee meeting on Monday, and some important topics discussed – in varying depth and with varying data quality – the two not always correlated.

1. A significant announcement from Mrs Cruickshank at the end of the meeting: the janitorial staff in the TENIG union have offered to take a 10% reduction in wages for the 2012/13 school year. Their contract entitles them to, and the preliminary budget assumed, a 4.5% contractual increase. By my math, starting from the $1.97 million compensation line item provided by Dr Waters, this means a total benefit versus the budget of $286,000. In return the union asked for the district to remove the outsourcing option for 2012/13. (Also, with no further actions next year, the salaries would revert in 2013/14 to the contracted level – a 20% increase that would not of course be a tenable option).

After getting the numbers sorted through, the Committee was very appreciative and broadly in favor of this offer, weighed against a potential outsourcing saving three times the offer, but with risk and the uncertainty of basing the alternative on now-expired bids.

This looks to be a good result for all concerned. Employment security is maintained and compensation continues to move towards market levels. Importantly, it can continue to do so assuming similar flexibility next year and a more equitable benefits program in the next contract.

2. Much information was shared regarding possible fees for “sports and activities”. Most neighboring school districts have either implemented some kind of fee or are considering doing so. There are as many approaches as there are school districts. Significant money can be raised: at $100 per sport/activity (with a cost to the district), the revenue would be about $150,000 for both high school students and middle school students. For context, about 1700 of the 2050 high school students participate in at least one sport/activity of any type; the middle school numbers are similar.

There seems to be a consensus that the district should charge only for those activities for which it incurs costs for either extra teacher time (EDRs) or for transportation. (An interesting issue thus raised: the process by which a club gets the status of having compensated teacher oversight). Also clear is that there should be a process to ensure that no student should be prevented from participating for financial considerations.

Decisions still to be made:

  • The same fee for any sport or activity, or some kind of tier system loosely based on cost?
  • A fee per student regardless of number of sports/activities or a fee per sport or activity up to a maximum?
  • The amount of any fees

The administration was charged with coming back with further permutations. It seems to me that it would be helpful to also tabulate other districts’ experience regarding participation levels and administrative costs. There seems to be a good argument for action here. For me, fairness would suggest some kind of tiered fee structure with a maximum, if it can be administered reasonably. The Committee is keen to give this air time at the Budget Workshop.

3. On revenues: no immediate bad news in the Corbett budget proposal. The move to bundle four separately calculated state funding items (basic ed, social security subsidy and public and non-public transportation) looks to me like a plan to cap future funding in a way that is unrelated to the actual underlying costs of those items. The one loss is a $50,000 grant that TE uses to fund the homework club.

Less good news on the property re-assessment front: $573,000 of lost revenue more or less planned for in the budget, but in addition $550,000 at risk from nine commercial assessments being appealed to the state courts and $820,000 at risk from a Vanguard appeal.

This illustrates the district’s vulnerability from relying solely on one tax that falls disproportionately on a class or classes of taxpayer that see no direct benefit from the tax, when many of those who get the benefit see their tax dollars going to other jurisdictions. But unfortunately any discussion of diversifying the tax base was hijacked in the last election.

4. A big mystery around the district medical benefits cost. Independence Blue Cross is apparently proposing a change in the way it gets compensated for administering our self-funded plan. Currently they get a 2.5% administrative fee (if only the overhead for the entire US healthcare system were that low!). Much perplexity about the proposal since it is being couched in terms of changing provider discounts. However, the net effect would be a $400,000 to $620,000 cost increase. I’m not sure there will be too much to be done about what is effectively a price increase, but more clarity needs to be provided.

5. No net surprises in the current district financials so far. We are on track for a deficit of about $0.75 million, as budgeted after adding back the $1.3 million budget reversal.

Custodian Outsourcing and Implementation of Activity Fees Remain TESD Finance Committee Options for 2012-13 Budget

I attended the T/E Finance Committee meeting last night as did Ray and Carol Clarke. However, other than one other resident, the 8-10 T/E school district teachers in the audience outnumbered us. Presumably, as the District begins the teacher contract negotiation process, there will be a continued presence at school district meetings from the teachers union.

Highlights from the Finance Meeting:

It should not be a surprise to learn that real estate tax delinquencies are up from last year, albeit only slightly at this point. However, the District has a process in place for the collection of unpaid real estate taxes and has hired Portnoff Law Association to collect the delinquent taxes. Currently there are 320 delinquent taxpayers, 75 are commercial properties and the remainder residential . . . total outstanding delinquent taxes: $1.7 million.

The majority of the meeting was spent in discussion on 2012-13 budget strategies. The most significant cost-saving measure that remains from last year’s budget discussion is the outsourcing of custodial services. Although the savings remains listed as $950K, the Board recognizes that is last year’s number and will need to be updated. There is the possibility of outsourcing a portion of the custodial services versus all of the services. There was talk of different options, such as outsourcing 3rd shift or segregating buildings to outsource. This will require a detailed RFP with specifics outsourcing options to bid. It was pointed out that some bidders may not be interested in bidding for a part of the custodial services.

There is an internal TENIG meeting on January 12, and the Board is hopeful that the union can ‘give back’ to help with expenses. The Board realizes that it is difficult to measure intangibles in the in-house custodial services . . . many of the TENIG employees live in the T/E school district and their families are part of the community. In addition to living in the community and protecting local jobs, there is a level of safety that comes from having in-house custodial services that is difficult to measure. The RFP is hold and the Board will wait to hear back from TENIG.

The implementation of an activities fee for participation in extra-curricular activities and transportation charges for some extra-curricular activities and busing for summer school remains on the 2012-13 budget strategy list. I recall the activities fee discussion last year, which the Board was able to avoid for 2011-12. However, because so many of the strategies are now in place, there are far fewer options in place.

The cost to the school district for non-mandated extra and co-curricular activities is $1.1 million. Because of the magnitude of the expense, the Finance Committee is looking at various options to help offset some of the cost, including an activities fee. In one scenario, a fee of $50 per student (high school only) involved in non-mandated sports or activities would net $70K to the District. This fee would be one-time only to the student, regardless of the number of activities. For those families unable to pay the fee, a hardship waiver would be in place. The cost-savings to the District for charging for transportation (middle school and high school) for some extra-curricular activities and summer school busing is budgeted at $140K. Of that amount, $20K is attributable to busing for summer school. Further discussion was suggested, including looking at other school districts.

Ray Clarke makes the following observation of the budget strategies,

There are no strategies for further meaningful deficit reduction beyond the possibility of TENIG concessions/janitorial out-sourcing. Reduction of in-service days ($200,000 per day) has been taken off the table during contract negotiations. To me, this means that we are looking at a deficit of at least $2 million. (One possible upside might be better healthcare cost experience – I read today of an S&P analysis that had private insurance spending growing in 2010/11 by 7.35%. Medicare growth was a low 2.6%. This mirrors TE’s experience, and suggests that cost growth has slowed for whatever reason and therefore the 10%/15% increases in the TE projection model may be too high).

The closing of St. Monica’s will affect approximately 150 students and the actual impact on the T/E school district is not clear. St.Monica’s will merge with St. Patrick’s in Malvern so for those students who change schools, there will be increased transportation costs to the District. For those families who decide on public education, there are increased educational costs. Devon and Beaumont Elementary are the public schools impacted by the closing of St. Monica’s. It’s too early to know the magnitude of the impact but it is possible that redistricting will be required to accommodate the additional students (specifically at Devon Elementary).

I asked for clarification on the teacher contract negotiating team. At the last school board meeting, members of the negotiating team included the hired negotiator, Art McDonnell (TESD Business Manager), Sue Tiede (TESD Director of Personnel) and Superintendent Dan Waters but no mention made of school board members. Although historically the District’s negotiating team for the teacher’s contract has always included school board members, it was confirmed that this time there would be no representation on the team by the school board. This decision struck me odd but it was explained that this was a Board decision and that the team would be given the parameters by the Board and receive ongoing updates. I know we have former school board members commenting on CM, who have been part of prior teacher contract negotiations, so I will be curious to know your opinions.

Perhaps, leaving the contract negotiations to the ‘professionals’ will keep the discussion focused and directed …? At this point, the negotiating team has not developed a strategy for public communication.

The Board is developing a communication strategy for the PSERS situation. There was discussion to include a special PSERS presentation for the public and updating the District website with PSERS information. Ray Clarke continues to believe that, “while it’s important for the public to know what’s driving the 1 – 1.5% tax increase that this [PSERS] represents for the next 4 years, it deflects attention from other issues under their [School Board] control.”

In closing, the Finance Committee presented a list of goals for 2012 that included (1) formulation of 2012-13 budget; (2) maintain 5-year budget projection model; (3) develop financial communication model and (4) develop steps for further EIT studies.

Ray Clarke asked the Finance Committee to explicitly address fund balance strategy as an additional goal. Clarke’s suggestion was rejected on the basis that it was included in goals 1 and 2 of the Finance Committee and was covered by the Policy Committee. As a reminder, T/E has one of the largest fund balances in the state — $30 million. Some in the community that would suggest that the fund balance is excessive and that as taxpayer’s money it should be used.

Loss of $570K in T/E Real Estate Appeals & Outsourcing of Custodial Services Remains a Strategy Option for TESD

There was a T/E Finance Committee meeting last night and although the entire school board was present, the Finance Committee is Betsy Fadem (Chair), Kevin Buraks, Jim Bruce and Rich Brake.

There were several interesting discussion items for me – Ray Clarke’s notes follow mine. There was much discussion about the school district’s decreasing real estate tax revenue. We learned that for 2011, there have been 147 successful residential real estate assessment appeals ($217K) and 41 successful commercial appeals ($352K) for a combined total of $570K in lost tax revenue. The largest commercial appeal was by Vanguard who was successful in five separate appeals. There was discussion about the school districting appealing the decisions on some of these successful commercial appeals. The example of Mealey’s Furniture and Big Lots was used – where a commercial real estate owner could have appealed their tax assessment while their real estate was vacant, received a lower assessment and then the property is leased and its value goes back up (but the commercial owner remains at the lower assessed rate). The case could be made by the school district that the assessed value of the commercial real estate has gone up and they should now pay more.

Appealing some of these commercial decisions could be a way to generate additional revenue for the school district. However, what was unclear was the ‘cost’ of these appeals to the school district (financial and staff time). In Harrisburg, there is discussion on requiring nonprofits organizations to pay real estate taxes. This was not discussed at last night’s meeting, but should this change occur, there is some new tax revenue to the school district. I wonder what kind of revenue could be generated from real estate owned by nonprofit organizations.

Another possibility for generating school district revenue was to shorten number of days on the school calendar. Apparently, TESD’s current school year is 9 days longer than the state requirement. For each non-teaching day, the district would save $200K in teacher and benefit costs. Shortening the school year by 9 days would yield $1.8 million in district savings. This is an interesting cost-savings approach and clearly the district cannot cut all 9 days. Some of those extra days are in the calendar if snow days require their use. But does it need to be 9 extra days — the last few days of a school year are not productive so what about cutting those half-days at the end of the year from the calendar.

(Note: It is not entirely clear to Ray Clarke and myself re the 9 days. Ray understood that strategy had to do with the 9 in-service days of the teachers ‘only’ and decreasing those in-service teacher days versus my understanding that the strategy involved decreasing the number of calendar school days. Ray has a call in to the school district for clarification and I will update when the information is available.)

A ‘new’ budget strategy under review for FY2012-13 was listed as ‘reduce equipment budget’ – $300K. I was clueless what ‘equipment’ this referred to – turns out the administration is suggesting reducing IT equipment purchases for the district. This is confusing because computer equipment was on the chopping block for the FY2011-12 budget and then when Corbett returned funding to the school districts (TESD received $1.3 million) the T/E school board discussed the putting the computer equipment back into the budget. Ultimately, the $1.3 million was added to the fund balance. So now here we are again with another round with IT equipment and a strategy to reduce the budget by $300K. Where is the school district’s long-range technology strategy? Taking technology ‘on and off’ the budget each year is not a strategy!

The outsourcing of the custodial services carried over from last year’s budget strategies and at $950K remains the most significant line listing of possible savings. The school district was able to save the in-house custodial services for the FY2011-12, helped greatly by the union members not taking raises for this year. As reported last night, their members are working with the school board on ways they continue to lower costs. More information should be available in January.

Ray Clarke’s comments from the Finance Committee Meeting:

At Monday’s meeting the TESD Finance Committee decided – I think – that it will recommend that the full Board on January 3rd 2012 not limit the 2012/13 tax increase to no more than the Act 1 Index increase of 1.7%. However, there seemed to be a sentiment that the tax increase in the Preliminary Budget (required therefore to be made available by January 5th) be capped at the Index plus Exceptions (a total of a 3.3% increase). Anything more would require a referendum.

A few observations:

  1. The property tax rate goes up as the base goes down. Successful appeals have cost over $0.5 million in revenue for 2012/13. The Index increase raises $1.5 million. The Committee did not pay much heed to the linkage.
  2. The Committee plans to raise property taxes through “Exceptions” that compensate for the increase in PSERS expenses just about dollar for dollar, while sitting on $15 million of taxpayer money in the Fund Balance earmarked for exactly that purpose and with no plan whatsoever as to when the money might be used.
  3. With the $3.3 million tax increase and visible budget strategies worth $0.7 million, the 2012/13 deficit is projected to be about $2.5 million. On top of the quantified strategies, there was a report of constructive discussions with TENIG (for savings at some percentage of the $950,000 out-sourcing estimate) and the option to cut up to nine teacher in-service days, worth $0.2 million per day. It appears that these numbers made the Committee comfortable that any gap after the 3.3% property tax increase could be covered from the Fund Balance.
  4. Notable that the largest expense decrease is $300,000 from reduced IT hardware spending. Is that the same line item that was last recommended for an increase to use of some of the $1.3 million state windfall? Is there an IT strategy at all??
  5. There was mention of a sentiment inHarrisburgto again reduce the social security match, and also to even reduce the PSERS match. Not quite the direction desired by the advocates of a state solution to the problem!
  6. The cost of the current benefit plan was mentioned in passing. $19,000 per year for family coverage. I have to think that a majority of union members would be willing to restructure the plan, if it meant more cash compensation and an overall benefit to the district. There was no discussion of any change to the status quo salary/benefits projection in the financial model.

It should be noted that this recommendation does not preclude the tax increase being lower than the Index plus Exceptions, but we know how that works!

TESD Finance Committee Notes, Including EIT Tax Study Group Members

As I was attending the Board of Supervisors meeting last night, I imposed on friend Ray Clarke to attend the Finance Committee meeting. Ray graciously attended and submitted his notes from the meeting for our review. I was pleased to see that the District released the information on the custodial outsourcing bid process. It is important for the integrity and transparency of the process, that the public receive the information – and I thank the school board members for providing it.
As Ray details, the 9 members of the EIT Tax Study Group have been chosen and were announced at the Finance Committee meeting. The members of the group include Michael Abele, Michael Benning, Rita Borzillo, Marie Falcone, William Mullin, Terri Smith, Andrew Snyder, Edward Stevens and Lauren Walsh. I am sure that you join me in thanking these community members for agreeing to serve on the tax study group.
As always, thank you for your notes from the meeting Ray — we are all most appreciative!
TESD Finance Committee Notes – Ray Clarke
Some important topics discussed at the Finance committee meeting:
1. This year’s projection. Revenues and expense roughly equal, without the budgeted $1.3 million from the Fund Balance. Helped of course by the PSERS rate reduction and internal programs more than offsetting revenue reduction. Somehow the district again manages to extract more money from taxpayers than is needed, and that will be especially true next year, with the just approved budget set for all worst contingencies. (Included is a just-received $225,000 bill from Blue Cross for 2009 expenses – a hazard of self-insurance [previously T/E was with the County consortium] that speaks to the need for long run funding, see later).
2. Fund Balance commitments. Regulations require the commitment of the fund balance for specific purposes. Previous designations seem to have been much looser and Finance Chair Mahoney is requiring a thorough analysis of the policy in the new context. The previous policy was to designate 5 years of PSERS increases vs the current year for “PSERS stabilization”. Which arithmetically means that the fund balance can only be accessed for stabilization when the cost starts to diminish (out in 2025 or so). Alternatively, should the balance be used when the increase is in fact ramping up, to mitigate the increase? Alternatively, should we not in fact assume that the state will have to come up with alternative funding anyway, and so return T/E’s money to the local property taxpayer? There is not enough money for the full five-year increase, as it is now anyway. Plus there is a need for a mechanism to smooth out health care costs in self-funded situation. An important issue.
3. Custodial out-sourcing. There were four bidders, all of which invested considerable time in their bids. The lowest bidder was Aramark, with a “base bid” of $1.3 million which was at least $500,000 below the others. The Administration concluded that the total cost would have been about $1.7 million, which they compared to the projected in-house cost of $2.6 million. If I have it right, the TENIG overtime changes and salary increase waiver (all TENIG members, not just custodians) closes $450,000 of the $900,000 gap. Of course, in future years as TENIG rates increase and PSERS rates escalate, the cost comparison for the out-sourcing solution will become more compelling. Hopefully all sides will continue to work on a satisfactory long run solution.
4. EIT study group. Members announced: Michael Abele, Michael Benning, Rita Borzillo, Marie Falcone, William Mullin, Terri Smith, Andrew Snyder, Edward Stevens, Lauren Walsh. As Pattye has reported, the selection process was based entirely on the demographics. Each applicant assigned a random number (1 to 186 total applicants), then the administration started from number 1 and filled up the various categories (6 T/3 E, 4 EIT/ 5 No EIT, 1 retired, 2-3 with school-aged children, 1 business owner, I renter, plus loose “as many age brackets as possible”, and “both genders”. Apparently they had to get down to #150 to fill all the categories. The essays only used to exclude those who had written “grossly inappropriate remarks” (none of those!). The group will meet six consecutive Thursdays starting the Thursday after Labor Day, and hold two “information sessions” for the public. A consultant from the PSBA will provide “information and data”. All meetings will be open to the public and hopefully will be used to solicit ideas for analysis and issues relevant to the Board’s decision on a referendum.

What’s the Price of a Hamburger in T/E? Property Taxes to Increase by 3.77%

In case you have not heard, the T/E School Board voted to approve the final 2011-12 budget last night . . . and yes folks; the residents of TESD will receive a 3.77% property tax increase. The vote count on the budget was 7-2; Debbie Bookstaber and Rich Brake were the dissenting votes. I guess I should have expected this outcome, but was surprised nonetheless. I left the school board meeting feeling that the decision was preordained and that no amount of discussion was going to change anything.

At the June 1 school board meeting, the school board voted to accept the TENIG (Tredyffrin Easttown non-instructional group) union’s agreement amendment for no salary increase for 2011-12. The school board decided not to out-source the custodial service; thus saving $300K in salaries and additionally $150K in overtime costs, for a total of approximately $450K savings to TESD. Many of the custodial staff are T/E residents, so the board decision saved some local jobs.

It was my understanding that at last night’s board meeting, the public would have the details about the custodian outsourcing RFP bidding process – how many custodian companies bid the job, what was the range of their bids, etc. I was disappointed that custodian outsourcing was not on the agenda, nor was there any discussion on the topic. If I want further information, I guess it would require filing a right-to-know request. I am not suggesting that the school board’s choice was incorrect; I just think that the public has a right to know the details pertaining to their decision.

Ray Clarke also attended the meeting last night and I am pleased to offer his notes from the meeting below. You will note that Ray mentions school board member Kevin Buraks comparison of school district property taxes to the cost of ‘hamburgers’. Out of context, his comparison is difficult to understand; so I have included the video clip prepared by Bob Byrne, editor of TE Patch. To understand Buraks comparison of school district property taxes to hamburgers, you will need to click here for the video.

Ray Clark’s T/E School Board Meeting, 6/13/11 Notes

The School Board approved by a 7-2 vote a 2011/12 budget that differed only marginally from the preliminary one, a result of removing the $150,000 contribution from the food service fund, thus increasing the draw from the general fund.

Only Debbie Bookstaber and Rich Brake were consistent in standing up for taxpayers. (On the other side, though, only Kevin Mahoney, Anne Crowley and Kevin Buraks spoke up for the budget – at their peril, though, see below. And, does Jim Bruce ever contribute anything to important issues?).

The increase results in a millage rate calculated to six significant figures (18.6474), in order (as was stated) to capture every last cent of permissible blood from the taxpayer stone. This despite the points below made by most of the board that spoke – regardless of which way they voted!

1. The amount of year’s tax increase does not change the structural budget problem in subsequent years.

2. There is a $29 million general fund balance, earning next-to-no interest, and which will be depleted by less than 7% under the proposed budget (with another 7% contingency for everything including the kitchen sink).

3. Since the preliminary budget, the district has received $1.2 million of union sacrifices. The taxpayer sees no benefit of those.

4. Since the preliminary budget, the state house and senate are working on bills that will likely restore the >$1 million capricious social security reimbursement cut in Corbett’s budget.

5. The district has consistently over the years held the line at the Act 1 Index increase, up until now.

6. The aggregate metropolitan area is is managing with less than two thirds of T/E’s increase.

Crowley sees the maximum increase for 2011/12 as key to maintaining the education program long term, while Buraks likened the TE educational product to hamburger, priced (tax rate? tax amount? spending per student?) just less than Great Valley’s and more substantially below Lower Merion’s. Since the product is arguably at least as good, we should be just fine with increasing the price. The very same argument that the union have used for years to ratchet up compensation and get us into today’s mess!

Let’s just continue this analogy: People chose to live here because they appreciate hamburgers, and they like the value of T/E’s. Increases beyond the competition’s remove that value. They also like that the other customers share their values and that eating with them at the stand enhances the value of the meal, and indeed they volunteer at the hamburger stand to make the product even better. Nothing whatsoever to do with the amount spent for the burgers themselves. Also remember that T/E’s product is inherently better value because it has made lower cost restaurant location choices than, say, LM, and has better scale in its operations than, say, Radnor, and has more non-consuming commercial interests that contribute to its cost.

Another disappointing item on the “Consent Agenda”: the approval of pricing for contracted services for 2011/12. The Board voted to approve 10 pages of supplier prices for mostly special education services but also many facilities contractors, “orthopedic specialist”, lawyers, “schooldude.com”, etc. etc. This information was in the online agenda, but not in the meeting hand out. Why?

But that’s not the point. From the information presented there was no way to tell how prices compared with this year’s or where the spend is likely to be concentrated. We do know that the architect hourly fees are down and the solicitor costs are flat, but what about the rest? There’s a budget strategy to get supplier costs down – how much did this list contribute to that strategy? There is no indication that the Board received any information on which to base their approval of the pricing. Even though there is no commitment to purchase, this just is not acceptable governance practice.

Also: a) A lot going on in Harrisburg; unpredictable, but tending to shift the balance of power towards districts/taxpayers and away from unions, and b) Facilities wants to move forward with a trial rental of Teamer Field on week-ends, and battle lines seem to be forming.

The Clock is Ticking Down for T/E School Budget . . . Will Property Tax Increase be the Highest of our Neighbors

The clock is ticking down . . . the T/E School Board votes on the final budget for 2011-12 on Monday, June 13, 7:30 PM at Conestoga High School. The preliminary school budget contained a property tax increase of 3.8%. Will that tax increase remain in the final budget or is possible that the school board members may consider a lower increase?

The school board and the administration have battled their way through the 2011-12 budget since last fall, with regular school board meetings as well as finance and special budget meetings. The board and administration thoroughly reviewed many budget strategies and made difficult educational and programming decisions. The school district reached agreements for the 2011-12 school year with the teachers union (TEEA) and with the non-instructional union (TENIG). In the spirit of shared sacrifice, union members from TEEA and TENIG showed their support for the school district and agreed to a variation of a salary freeze to help the bottom line of the District’s 2011-12 budget.

According to the TEEA agreement with the T/E school district, the teachers will have their salaries frozen for the first 6 months of the 2011-12 school year based on their final paycheck of the 2010-11 school year. As part of the agreement, TESD agreed there would be no involuntary furloughing or involuntary demotion of teachers for 2011-12. The cost savings for the TEEA agreement is approximately $1 Million to the school district.

The agreement reached between TENIG and TESD is a zero percent wage increase for the 2011-12 school year. The savings to the school district with TENIG’s salary freeze is $300K. Adding the additional reduced overtime wages and the total TENIG savings to the District is approximately $450K.

The school board members applauded the efforts of TEEA and TENIG . . . the combined total help from the two unions represents nearly $1.5 million in savings to the school district.

Here’s my question . . . given the substantial level of savings, due to TEEA and TENIG’s spirit of shared sacrifice, will the school board also recognize the ongoing sacrifices of the taxpayers in this school district? Will the school board consider a reduction in the proposed 3.8% property tax increase? The preliminary 2011-12 budget could not predict the $1.5 million savings from the unions, so should the taxpayers expect the final budget to reflect those savings? I believe that the 3.8% includes taking the full Act 1 exemptions but maybe in light of the union savings, the percentage increase could be reduced.

In anticipation of TESD’s final budget vote on Monday, I thought it would be interesting to see where the currently projected 3.8% property tax increase measures up against other local school districts. I think that it is fair to use Radnor, Lower Merion and Great Valley school districts for comparison. Generally speaking, these school districts are comparable in level of education quality and I would think that the economic climate of the taxpayers is similar. Each of these school districts has approved their final budgets —

  • Radnor Township School District1.4% tax increase Lowest RDSD tax increase in years. RTSD credited the Radnor teachers’ sacrifice in reaching a contract agreement for the low tax increase.
  • Great Valley School District 2.9% tax increase GVSD Superintendent Alan Lonoconus, said of the tax increase, “We tried very hard this year to make sure the impact to programs was as gentle as possible. But we also kept in mind the economic conditions not only of our district, but of the nation.”
  • Lower Merion School District3.3% tax increase Lowest tax increase since 1984-84 fiscal year

Although not an adjacent school district and perhaps not as highly ranked academically as Radnor, Great Valley, Lower Merion and T/E school districts, I was fascinated by West Chester School District’s final budget decision —

  • West Chester School DistrictNO tax increase. The 0 percent tax increase balanced WCSD budget by taking $3 million from their fund balance.

It is not surprising that the taxpayers of WCSD overwhelming supported the decision of their school board leaders not to increase taxes. In reviewing the demands of their school budget over the last months, there was much discussion between school board members and residents in regard to the severe economic conditions facing the residents, rising gas prices, high unemployment, etc. Many taxpayers in the WCSD complained that they are already financially pushed to the limit — the 0 percent tax increase decision came as welcomed news.

As it now stands, unless the T/E school board members reconsider, a property tax increase of 3.8% is on the table for a vote at Monday night’s school board meeting; this increase will represent the highest increase among our neighbors. TESD is a great school district, and one for which we all can be proud, but likewise could be said for Lower Merion, Great Valley and Radnor school districts. My guess is that the argument that some will make is that TESD currently has a lower tax rate than these other mentioned school districts and therefore taxpayers are in a better position to afford the tax increase. Correct?

I have not done a research analysis but I believe that TESD may have the highest fund balance of any of these neighboring school districts. (In fact, I think I read somewhere that TESD fund balance is one of the highest in the state). Some could argue that the fund balance represents over-taxing of residents in prior years, so . . . now that the taxpayers of this community need financial relief can we ask that the TESD use more of the reserve and lessen our property tax increase?

To help the community, the teachers, secretaries, custodians, cooks and maintenance personnel in this school district have shown us the meaning of shared sacrifice. Is it possible that TESD will acknowledge the sacrifices of the District taxpayers, and lower the expected property tax increase? Or, is this just wishful thinking on my part . . . ?

T/E School Board’s Special Meeting on June 1 includes Amended TENIG Agreement . . . No Custodial Outsourcing but What about the $800K Proposed Savings?

The TESD 2011-12 budget process started in late 2010 and has included multiple budget, finance and school board meetings and updates to the public. The school board and administration have worked to present a timeline of budget information and to keep us informed on budget strategies. Hearing the ‘shared sacrifice’ appeal from the Board to the Tredyffrin Easttown Education Association (TEEA) teachers union, both sides were able to come to an agreement for the 2011-12 school year, which included a salary wage freeze. The process was tedious and both TESD and TEEA appeared satisfied with the results.

Throughout the budget process, the administration and Board supported TESD’s educational standard as its focus and priority. Any budget strategies requiring cuts to educational programming was only with much discussion. One such expense reduction decision was the budget strategy that included eliminating Latin and German in the middle school . . . a difficult decision, but one that was required to help bridge the budget deficit. Generally, I have observed willingness on the Board’s part to fully disseminate the budget information and to keep the budget process as transparent as possible. It is for that very reason that I find this week’s special board meeting and the notification of agenda items (or lack of notification) somewhat troubling.

I received email notification last week of TESD’s upcoming special board meeting on Wednesday, June 1 at 5:30 PM. The stated purpose of the meeting is to approve the Conestoga High School graduating Class of 2011. There was no mention of any other agenda items at the meeting – and I probably would not have bothered to check further except that a township resident alerted me. In review, the June 1 agenda includes a “proposal to amend the TENIG collective bargaining agreement”. Contained in the agenda materials is the proposed amended TENIG agreement and schedule of wages, effective 4/29/11 – 6/30/14. (Click Here for meeting agenda, see pgs. 5-7 for TENIG agreement and schedule of wages).

I will discuss the contents of the TENIG agreement and wages later in this post, but first I will address TESD process as it relates to the outsourcing of custodial services. For months, there has been discussion at the budget, finance and regular school board meetings about the possibility of outsourcing of custodial services as a budget strategy option. At each meeting where details of the budget were presented, there was always a slide indicating the possible savings of $800K for custodial outsourcing. To quantify the District savings, the administration sent out a RFP for custodial outsourcing earlier in the year. According to the School Board Meeting Minutes of 3/21/11, “. . . the results of bidding on outsourcing custodial services will be available on April 4 and will be provided to TENIG for review. The committee will evaluate the bid results as an option to balance the budget”.

The School Board Meeting Minutes of 4/25/11 further reflected that “. . . The District is in the process of analyzing bid results for the outsourcing of custodial staff. These bid results have been shared with TENIG, and we continue discussions with TENIG on alternatives to outsourcing. . . “

At the May 9 School Board Meeting, the 2011-12 Final Budget was presented; (Click Here for Final Budget) Page 15 shows the following:

*Remaining Budget Shortfall ($2,183,448)
Options to Close Shortfall:
1. Outsourcing Custodial Services: $800,000
2. Pay Increase Waiver TENIG only: $300,000
3. Additional Budget Strategies $0
4. Use of Fund Balance $2,183,448
(Tentative for Proposed Final Budget on May 9th)
*Includes TEEA Proposal of 50% Pay Increase Waiver of May 6th

Contained in the proposed final budget is the salary freeze offer from the teachers union, TEEA. There was no mention in the budget presentation of the status of the custodial services outsourcing or of TENIG’s contract.

After the meeting, I mentioned to a couple of Board members that I was surprised that custodial outsourcing was not on the agenda nor was there any mention made of the results of the bids for the outsourcing; but received no response. There was indication in the final budget (see above chart) that one of the few options remaining to close the shortfall was outsourcing of custodial services — an expected savings of $800K. How many outsource bids were received? What were the offers? How did the custodial outsourcing bids stack up against TENIG’s contract for custodial services?

Following the May 9 school board meeting, the TESD released a press release summarizing the proposed final budget:

http://www.tesd.net/2127101028153743227/lib/2127101028153743227/11may9.pdf

Highlights of the proposed 2011-12 proposed final budget includes:
(1) Property tax increase of 3.77%, which equates to an average increase of $171 to T/E homeowners;
(2) $3.85 million in expense reductions and revenue increases;
(3) And $2.25 million in fund balance contribution to address the $8.9 million budget gap between revenues and expenditures.

The press release further explained that the proposed final budget includes the offer from the T/E instructional collective bargaining unit (TEEA). As was the case at the TESD Board Meeting, the summary does not (1) address the projected savings resulting from outsourcing custodial services ($800K) or (2) pay increase waiver from non-instructional collective bargaining unit, TENIG ($300K). According to the May 9 School Board Meeting Minutes these are the only remaining options to close the budget shortfall

What I find fascinating in the May 9 press release is the statement that the Board is “still evaluating other options to close the budget shortfall and will present the final budget on June 13”.

We now fast forward to tomorrow’s special board meeting and find that negotiations between TESD and TENIG have apparently already taken place and there is now a proposal for an amended TENIG agreement.

Questions: What happened with the custodial outsourcing bid process? What were the results of the bids? Why did the notification for tomorrow’s special board meeting not include any mention of the TENIG amended agreement proposal?

The custodial services outsourcing process began correctly but somehow the Board lost the transparency in the process and now we are left with the end product – the amended TENG contract. Although the Board continued to say meeting after meeting that there were looking at the final remaining budget savings options, we skip over the $800K option to outsource custodial services without explanation. To be fair, it is entirely possible that after reviewing the bids for outsourcing, the Board decided for any number of reasons (cost, student security, etc.) that they wanted to keep the custodial service ‘as is’ and covered by TENIG. These reasons could be valid – but why not let the public know why and how that decision was made?

Now we if look at the amended TENIG agreement; I have received several questions and concerns from taxpayers on this matter. Yes, TENIG has agreed to a salary freeze for 2011-12 year and I think that savings may be $300K. However, there are two additional years to the TENIG contract with increases of 4.5% each year. Was there any attempt by the Board to negotiate those increases? Is it possible that the District is (1) losing the cost savings of outsourcing custodial services and (2) additionally giving a pay increase to custodial staff?

The Board has been so diligent in their budget review process when cutting educational programs and increasing student fees (increased student parking fees and driver’s education training), I am surprised that non-education wages of TENIG are increased.

In closing, I have a couple of problems: (1) where was the transparency in the outsourcing process, and (2) understanding there remains a $2+ million budget shortfall in TESD, how can the Board rationalize an increase in TENIG wages in 2012 and 13 when the District has been forced to cut educational programming and increase fees.

Milestone Agreement Between T/E Teachers and School District: Is it a ‘Salary Freeze’ or a ‘Pay Waiver’. . . Does it Really Matter What We Call It?

There was a milestone agreement between the T/E teachers and the school district last night. I am not sure whether we call the TEEA-TESD agreement a salary ‘freeze’ or a ‘pay waiver’ but, . . . if both sides are happy, does it really matter what we call it?

The school board members presented the details of the new teacher union offer. The offer from Tredyffrin Easttown Education Association (TEEA) was read and the discussion opened for public questions. The board voted on the proposal and the agreement won unanimous support from the school board.

To read a copy of the TEEA-TESD agreement, click here. If I understand the agreement, here are the important points:

  • The teachers will have their salaries frozen for the first 6 months of the 2011-12 school year based on their final paycheck of the 2010-11 school year.
  • For the second 6 months of the 2011-12 school year, the teachers salaries will ‘unfreeze’ and they will advance.
  • With this agreement, the T/E school district agrees there will be no involuntary furloughing or involuntary demotion of teachers for 2011-12.
  • This agreement is a one-time cost savings for the 2011-12 school year only and is not precedent setting. The agreement does not extend the current contract and negotiations for the next contract will be on schedule.

I asked Pete DePiano, union president of TEEA for his thoughts on the TEEA-TESD agreement. He writes,

“I am so proud of the membership of TEEA for stepping up with this offer during these difficult times. Likewise, I am happy that the Board was able to accept. A special note of gratitude must be extended to Mrs. Cruickshank, for we were in constant communication behind the scenes for a VERY long time working on this – even prior to the Corbett announcement. It was that continued line of open dialogue that made this all possible. We are looking forward to a wonderful conclusion of the school year as we continue to serve the greatest students in the greatest district in the Commonwealth of PA.”

Pete DePiano
President, TEEA

______________________________________________________

Ray Clarke attended last night’s school board meeting and at my request kindly shares his thoughts below.

Re the Earned Income Tax Study Group, I want to personally thank Kevin Mahoney for suggesting that the group members be apolitical. The school board members made it clear that no one from the school board would be on the study group and I applaud their efforts in making the selection process open and transparent!

Important developments at tonight’s School Board meeting
  1. The Board voted to accept an offer from the TEEA to defer next year’s contracted pay increase for six months with no change to the contract termination date. After six months, salaries will increase to the contracted 2011/12 levels, with step and level movement. There will be no furloughs or demotions during 2011/12, and 2012 retirees will be protected. This is expected to save the District $917,000 in 2011/12. The five year model, which assumes no salary increase in the next contract, claimed that these savings versus the previous projection continue into the out years – although I remain puzzled about that, since the matrix and distribution in place at 6/30/2012 is unchanged under the offer. It may be important to understand expectations on this going into the next contract negotiations.
  2. The impact on next year’s budget is fairly clear, though. The board approved a budget that has a 3.8% property tax increase and a $2.2 million draw down of the fund balance, with an additional $1.9 million possible in the event of specific contingencies. There was no appetite for an Activity Fee for next year, and very different philosophies from all Board members that spoke. Only Kevin Buraks voted against an amendment to remove it from the preliminary budget. Worth looking at the tape to review the issues.
  3. The Board defined the process for obtaining citizen input on the pros and cons of an EIT, through a Tax Study Group. They will select 9 residents for the Group based on information to be requested in a May 16th mailing to residents. Work to be completed by October, for a November decision by the Board whether to move the process forward towards an April 2012 referendum. Important difference from the 2006 effort: the group’s role is not to present a recommendation, but to help educate the Board and the public. The Board is looking for representation from across T/E, and wants the group to be apolitical. All meetings to be open to the public; not sure if that’s very conducive to a deep dive into the economics, but maybe that’s not the purpose.
  4. Per Dr Brake’s legislative report, there seems to be some likelihood that the Legislature will reverse or limit the Governor’s proposed capricious Social Security reimbursement cut, so that may help TESD’s budget (at best, by $1 million). It also seems probable that the local ability to increase taxes beyond the Act 1 limit will not be completely eliminated, retaining at least the possibility of PSERS and special education Exceptions.
A final pet peeve: once again this year the gaming rebate was used in the context of an offset to the property tax increase. If the rebate was increasing by $171 that would be true, but in fact it’s just the same ~$180 it has been for every year since 2008/9. At least it wasn’t Dr Waters this time, but rather Dr Brake, who I thought might know better.

T/E School Board Meeting Tonight . . . Proposed Final 2011-12 Budget Vote

Reminder:
There is a T/E School Board meeting tonight — May 9, 2011 at 7:30 pm at Conestoga High School. At this meeting, the School Board will vote on the proposed 2011-2012 final budget. Click here to review the proposed budget. Will the decision of the school board be to fund the deficit with the use of the fund balance?

I assume that we will also learn the outcome of out-sourcing of TESD custodial services. My understanding is that the outsourcing quotes should have been received by the district and the board will have determined the cost-savings (if any) of out-sourcing.

According to the agenda for tonight’s meeting, the board will present information on the school district’s plan to form an Earned Income Tax Study Group.

Looking to T/E Teachers for ‘Shared Sacrifice’ – Pay Increase Waiver not Salary Freeze

School districts across the state are scrambling to plug projected budget gaps stemming from deep cuts in state funding and TESD is no different. The use of “shared sacrifice” has become a common and oft-repeated phrase in today’s political discourse. As school district budget deadlines loom, we are see that teachers (fairly or unfairly) are finding themselves of in the limelight on this topic. In my view, we do need to boldly address our deficit crisis, but we need to do it in a way that is fair.

Last night’s TESD Finance Committee meeting had a very different tone than the last school board meeting. As the school board and administration discussed the few remaining available budget strategies, I had a sense that the school board was digging in its heels, expecting a ‘pay increase waiver’ versus a ‘salary freeze’, which the teachers union previously offered. Although the T/E teachers union (TEEA) states the value of their salary freeze offer is $2.5 million, the school board counters that the freeze does nothing more than extend the teacher contract by a year and ultimately costs the district more money. Encouraging the teachers union in the path of shared sacrifice, the school board prefers the teachers consider a pay increase waiver which, if I understand correctly, requires opening their current contract.

Credit needs to be extended to TEEA for their offer of a salary freeze to the school district. For some teachers, they believe that by offering a salary freeze, they are sharing the sacrifice. Let’s remember that Gov. Corbett suggested that teacher unions offer a salary freeze to their school districts to help with budget deficits. (I don’t recall his using the words, ‘pay increase waiver’.) Yes, there is a budget crisis in school districts across the state; but I admit that I have difficulty with the breaking of a contract, which was negotiated in good faith by the teachers. If contracts mean nothing then should we all go home and break our car purchase contract, our mortgage contract, and every other contract we signed in good faith where we expect both parties to be honorable. What about ‘negotiating’ after the contract is fulfilled . . . ?

Looking at discussion from the other side, the school board is struggling with the remaining budget shortfall. So . . . what do they do? In their minds, they believe that the teachers should help with a ‘pay increase waiver’ (shared sacrifice) which according to their calculations could net $3 million. At the meeting I had a sense that the school board is listening to the public and are interested in keeping the process transparent. They offered that they have heard from TENIG, the non-instructional union, and are reviewing the offer. Keeping the community ‘in the loop’ will prove a win-win for the school board, the teachers, and ultimately the taxpayers.

Setting aside the timeline debate of the April 14th TEEA teacher union offer letter of a salary freeze, and the rejection of the offer by the school board, last night the Finance Committee presented their side of the argument in favor of a pay increase waiver. According to their analysis, the school district budget projection for 2011-12 is as follows:

  • Budget Projection as of May 2, 2011: $3,170,509
  • Budget Projection (TEEA and TENIG Pay Increase Waiver: $170,510
  • Budget Projection (TEEA Proposal Letter): $946,122
  • Budget Projection (Custodial Outsourcing): $2,370,438

Following the Finance Meeting, I asked Pete DePiano, president of the teachers union for his thoughts. Here is his response,

“The 450+ members of the Tredyffrin/Easttown Education Association will stay true to their integrity in attempting to come up with a final cost savings offer for the district’s consideration.”

Pete DePiano
President, TEEA

DePiano’s response tells us that the teachers are continuing to work on possible solutions to help with the budget crisis. Open and honest communication between the teachers union and the school board will aid greatly in the ongoing budget discussions. I want to believe that both sides can work together for the sake of the kids and the community.

Ray Clarke kindly offers his comments on the Finance Committee meeting below:

  • The TEEA proposal is judged to be worse on a 5-year time horizon than the status quo, because the projected $2.05 million of savings in 2011/12 is offset by salaries in the following years that are $0.5 million higher than they would otherwise be, due to two years of step movement rather than one. The higher salaries also trigger proportionate benefit cost increases, but there appear to be no fundamental differences between benefit programs, premium contributions, etc. in either scenario.
  • The salary “waiver” has the greatest impact on the district because the saving occurs every year. Although the model was presented without tax increases, it looks to me that, under this scenario, very modest increases in taxes (property or EIT) and gradual use of the “PSERS stabilization” fund balance could allow the district to fund the retirement fund beyond the five-year time horizon.
  • The Board did appeal again to the community to make their voice heard with legislators regarding the PSERS problem, and our frequent academic economist commenter also reminded us once again of the fundamentally bankrupt public pension plans. A couple of data points: the recent “fix” assumes an 8% investment return, and provides retiring career teachers with my estimate of an equivalent $1.25 million annuity. Just to keep this simple, here are the options:

1. Reduce the liability by undoing the multiplier increase for all, not just new hires (the decrease needs a change in the state constitution, unlike the increase…)

2. Increase taxes:
a) statewide (Marcellus gas, personal income, corporate income, etc.), or
b) locally (property, income)

3. Redirect spending from somewhere else. Like where? Pick your poison! What would Dinniman and Kampf propose?

  • There was a very unsatisfying discussion of a possible Activity Fee, punting it along to next week’s board meeting. Needless complications about different bases for charging. The bottom line: salaries and transportation for (non-mandated) extra-curricular activities cost the district $1.14 million a year. 80-85% of students participate in at least one. Nobody is making any argument that these activities are not totally worthwhile. A universal charge could be simply administered. So the issue is straightforward: do these continue to be funded by all taxpayers, or do families with high school and maybe middle school students bear a little more of the cost? Hopefully the full Board can have a discussion along these lines next week.
  • The timeline for an EIT study seems very compressed. The Board is considering appointing a study group; they need to get on that right away. If an EIT makes enough sense to put to a referendum, there’s a November 16th deadline for notifying the townships of that intent.
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